Intrapreneurship

Intrapreneurship is the act of behaving like an entrepreneur while working within a large organization.

Definition

In 1992, The American Heritage Dictionary acknowledged the popular use of a new word, intrapreneur, to mean "A person within a large corporation who takes direct responsibility for turning an idea into a profitable finished product through assertive risk-taking and innovation". Intrapreneurship is now known as the practice of a corporate management style that integrates risk-taking and innovation approaches, as well as the reward and motivational techniques, that are more traditionally thought of as being the province of entrepreneurship.

History

The first written use of the terms ‘intrapreneur’, ‘intrapreneuring,’ and ‘intrapreneurship’ date from a paper written in 1978 by Gifford and Elizabeth Pinchot. Later the term was credited to Gifford Pinchot III by Norman Macrae in the April 17, 1982 issue of The Economist. The first formal academic case study of corporate entrepreneurship or intrapreneurship was published in June 1982, as a Master's in Management thesis, by Howard Edward Haller, on the intrapreneurial creation of PR1ME Leasing within PR1ME Computer Inc. (from 1977 to 1981). This academic research was later published as a case study by VDM Verlag as Intrapreneurship Success:A PR1ME Example by Howard Edward Haller, Ph.D. The American Heritage Dictionary of the English Language included the term 'intrapreneur' in its 3rd 1992 Edition, and also credited Gifford Pinchot III as the originator of the concept. The term "intrapreneurship" was used in the popular media first in February 1985 by TIME magazine article "Here come the Intrapreneurs" and then the same year in another major popular publication was in a quote by Steve Jobs, Apple Computer’s Chairman, in an interview in the September 1985 Newsweek article, where he shared, “The Macintosh team was what is commonly known as intrapreneurship;only a few years before the term was coined—a group of people going, in essence, back to the garage, but in a large company."

Employee intrapreneur

"Intrapreneurship refers to employee initiatives in organizations to undertake something new, without being asked to do so." Hence, the intrapreneur focuses on innovation and creativity, and transforms an idea into a profitable venture, while operating within the organizational environment. Thus, intrapreneurs are Inside entrepreneurs who follow the goal of the organization. Intrapreneurship is an example of motivation through job design, either formally or informally. (See also Corporate Social Entrepreneurship: intrapreneurship within the firm which is driven to produce social capital in addition to economic capital.) Employees, such as marketing executives or perhaps those engaged in a special project within a larger firm, are encouraged to behave as entrepreneurs, even though they have the resources, capabilities and security of the larger firm to draw upon. Capturing a little of the dynamic nature of entrepreneurial management (trying things until successful, learning from failures, attempting to conserve resources, etc.) adds to the potential of an otherwise static organization, without exposing those employees to the risks or accountability normally associated with entrepreneurial failure.

Examples

One of the most well-known is the "Skunk Works" group at Lockheed Martin. The group was originally named after a reference in a cartoon, and was first brought together in 1943 to build the P-80 fighter jet. Because the project was to eventually become a part of the war effort, the project was internally protected and secretive. Kelly Johnson, later famous for Kelly's 14 rules of intrapreneurship,was the director of this group.

Another example could be 3M, who encourage many projects within the company. They give certain freedom to employees to create their own projects, and they even give them funds to use for these projects. (In the days of its founders, HP used to have similar policies and just such an innovation-friendly atmosphere and intrapreneurial reputation.) Besides 3M, Intel also has a tradition of implementing intrapreneurship. Google is also known to be intrapreneur friendly, allowing their employees to spend up to 20% of their time to pursue projects of their choice.

The difference between entrepreneur and intrapreneur are stated below:

An entrepreneur is an independent person who starts his venture and bears full risk of his failure and enjoys the fruit of his success whereas intrapreneur is partially independent and is sponsored by the corporation in which he is working. He is also not liable to bear the losses in case of his failure. An entrepreneur raises the finance from various sources and also guarantees their return whereas an intrapreneur does not own responsibility to raise the capital or to return it. An entrepreneur has no relation with any organisation whereas an intrapreneur operates within the organisation where he is working.

Features of Intrapreneurship: Entrepreneurship involves innovation, the ability to take risk and creativity. An entrepreneur will be able to look at things in novel ways. He will have the capacity to take calculated risk and to accept failure as a learning point. An intrapreneur thinks like an entrepreneur looking out for opportunities, which profit the organization. Intrapreneurship is a novel way of making organizations more profitable where imaginative employees entertain entrepreneurial thoughts. It is in the interest of an organization to encourage intrapreneurs. Intrapreneurship is a significant method for companies to reinvent themselves and improve performance.

In a recent study, researchers compared the elements related to entrepreneurial and intrapreneurial activity. The study found that among the 32,000 subjects who participated in it, five percent were engaged in the initial stages of a business start-up, either on their own or within an organization. The study also found that human capital such as education and experience is connected more with entrepreneurship than with intrapreneurship. Another observation was that intraptreneurial startups were inclined to concentrate more on business-to-business products while entrepreneurial startups were inclined towards consumer sales.

Another important factor that led to the choice between entrepreneurship and intrapreneurship was age. The study found that people who launched their own companies were in their 30s and 40s. People from older and younger age groups were risk averse or felt they have no opportunities, which makes them the ideal candidates if an organization is on the look out for employees with new ideas that can be pursued.

Entrepreneurship appeals to people who possess natural traits that find start ups arousing their interest. Intrapreneurs appear to be those who generally would not like to get entangled in start ups but are tempted to do so for a number of reasons. Managers would do well to take employees who do not appear entrepreneurial but can turn out to be good intrapreneurial choices.

All you need is the ability to encourage employees to develop new ideas, and then give them the time, space and resources needed to turn those ideas into reality.
Characteristics and skills necessary for becoming a successful intrapreneur include:* Knowledge of the internal and external environment.

• Visionary and willing to challenge the status quo.
• Diplomatic and able to lead cross-functional teams.
• Ability to build a professional-support network.
• Ability to persevere, even in the face of uncertainty.

The Importance of Intrapreneurs Intrapreneurs are responsible for keeping companies current. They are the energy behind new ventures that make big businesses stay profitable. Recently we have seen what can happen to companies that do not actively invest in intrapreneurship- take a look at Kodak and RIM. Perhaps if they had put greater focus on evolving, their products and companies would be in much better situations currently.

It is extremely important for schools to teach the basics of entrepreneurship. Whether or not every student becomes the next Bill Gates does not matter. Entrepreneurial skills can translate themselves into a number of applications. Those who have these valuable skills are capable of doing anything from opening their own clothing store, to leading the team at Apple that comes up with the next iPad.

The first written use of the terms ‘intrapreneur’, ‘intrapreneuring,’ and ‘intrapreneurship’ date from a paper[1] written in 1978 by Gifford and Elizabeth Pinchot. Later the term was credited to Gifford Pinchot III by Norman Macrae in the April 17, 1982 issue of The Economist.[2]

Kelly's Rules

Rule Number 1 The Skunk Works' program manager must be delegated practically complete control of his program in all aspects. He should report to a division president or higher.

Rule Number 2 Strong but small project offices must be provided both by the military and industry.

Rule No. 3 The number of people having any connection with the project must be restricted in an almost vicious manner. Use a small number of good people (10 percent to 25 percent compared to the so-called normal systems).

Rule No. 4 A very simple drawing and drawing release system with great flexibility for making changes must be provided.

Rule No. 5 There must be a minimum number of reports required, but important work must be recorded thoroughly.

Rule No. 6 There must be a monthly cost review covering not only what has been spent and committed but also projected costs to the conclusion of the program. Don't have the books ninety days late and don't surprise the customer with sudden overruns.

Rule No. 7 The contractor must be delegated and must assume more than normal responsibility to get good vendor bids for subcontract on the project. Commercial bid procedures are very often better than military ones.

Rule No. 8 The inspection system as currently used by the Skunk Works, which has been approved by both the Air Force and the Navy, meets the intent of existing military requirements and should be used on new projects. Push more basic inspection responsibility back to the subcontractors and vendors. Don't duplicate so much inspection.

Rule No. 9 The contractor must be delegated the authority to test his final product in flight. He can and must test it in the initial stages. If he doesn't, he rapidly loses his competency to design other vehicles.

Rule No. 10 The specification applying to the hardware must be agreed to in advance of contracting. The Skunk Works practice of having a specification section stating clearly which important military specification items will not knowingly be complied with and reasons therefore is highly recommended.

Rule No. 11 Funding a program must be timely so that the contractor doesn't have to keep running to the bank to support government projects.

Rule No. 12 There must be absolute mutual trust between the military organization and the contractor with very close liaison on a day-to-day basis. This cuts down misunderstanding and correspondence to an absolute minimum.

Rule No. 13 Access by outsiders to the project and its personnel must be strictly controlled by appropriate security measures.

Rule No. 14 Because only a few people will be used in engineering and most other areas, ways must be provided to reward good performance by pay, not simply related to the number of personnel supervised.

See also

• Entrepreneur
• Corporate Social Entrepreneurship
• Skunkworks project

External links

• Intrapreneurship - Small Business Notes
• Intrapreneurship - MIT class notes